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CMS’ Overhaul Could Mean VBP is Working for Consumers

The Stark Law has been modernized: Here’s what you need to know


[11/24/20] This week, CMS announced they were modernizing and updating the Physician Self-Referral Law (i.e. “Stark Law”) to steer it towards a value-based payment (VBP) structure. The core of the law, to protect patients from unnecessary, low quality, and expensive services, will stay in-tact. The new adjustments support the CMS “Patients over Paperwork” initiative of reducing unnecessary regulatory burdens on physicians.

The Stark Law History

In 1989, when healthcare was paid for primarily on a fee-for-service (FFS) structure, the Stark Law was put into place to protect patients from unnecessary care that would benefit the physician. The law prohibits physicians from making referrals to another entity that they have a financial relationship with.

As quality over quantity continues to grow, the regulations of this law have not evolved very quickly. There have been some updated regulations added throughout the last 30 years, but they all still worked within the FFS environment.

Patients Over Paperwork

The healthcare system marked by $200 billion in annual administrative costs was challenged by the Trump administration’s Cut the Red Tape initiative in 2017. CMS responded by collecting an array of feedback over the last 3 years including over 15,000 public comments from providers. The Patients over Paperwork initiative was launched by CMS to get rid of outdated and time-consuming regulations that slow innovation. The program has saved the medical community $6.6 billion and 42 million hours through 2021.

The CMS Administrator commented that when the Patients Over Paperwork initiative was launched in 2017, front-line providers commented on the outdated Stark Law and how those regulations left them burdened with paperwork and missing value-based opportunities. These bureaucratic barriers were impeding patient care. The ambiguity of the law was having some pitfalls, specifically “freezing” physicians from providing the best care for fear they will violate the law. The result is millions of dollars being spent to fill the outdated regulations instead of offering a high level of care.

New Regulations & Guidance

The new changes will undoubtedly modernize the law allowing for exceptions specifically permitting value-based arrangements. CMS offered up a fact sheet to explain the additional guidance and requirements needed. This will permit providers to create innovative VBP solutions and coordinate high levels of care without of violating the self-referral law. This change will unleash innovation and allow for high-quality and low-cost solutions to be arranged. There are additional guidelines that have been put into place to protect against overutilization. CMS offered an example, compensation provided to a physician must be at fair market value (not overcharged). There is also guidance on how to determine if compensation meets this requirement.

It’s possible the new regulations simply didn’t go far enough in removing the barriers, according to the Medical Group Management Association (MGMA). The providers that have been reluctant to get into VBP may not see this as a large enough move to be willing to make the change.

Advocate's Perspective

It is imperative consumers are put first with these new changes. There are many opportunities that this new guidance allows, but there are some possible pitfalls. Consumers are vulnerable to the physician’s guidance. Safeguards have been carefully put into place to create meaningful protection for these groups, but it may not be enough. The movement from FFS to VBP shifts where the incentive lies and it’s important it is monitored to protect the consumer first.

The final rule offers big changes that can enhance value-based solutions throughout the country. This enhanced Stark Law will allow physicians to be extremely innovative while offering high-quality care. There are some concerns regarding protections for consumers but the built-in safeguards should provide protection for vulnerable consumers

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About the Author

Fady Sahhar brings over 30 years of senior management experience working with major multinational companies including Sara Lee, Mobil Oil, Tenneco Packaging, Pactiv, Progressive Insurance, Transitions Optical, PPG Industries and Essilor (France).

His corporate responsibilities included new product development, strategic planning, marketing management, and global sales. He has developed a number of global communications networks, launched products in over 45 countries, and managed a number of branded patented products.

About the Co-Author

Mandy Sahhar provides experience in digital marketing, event management, and business development. Her background has allowed her to get in on the ground floor of marketing efforts including website design, content marketing, and trade show planning. Through her modern approach, she focuses on bringing businesses into the new digital age of marketing through unique approaches and focused content creation. With a passion for communications, she can bring a fresh perspective to an ever-changing industry. Mandy has an MBA with a marketing concentration from Canisius College.